Ontario Court of Appeal: Employee Did Not Breach Duty to Mitigate

By Jessica Young
5/27/2014

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Employees who are wrongfully dismissed have a duty to mitigate their damages by seeking out employment opportunities. An employee may also be obligated to accept a position with the terminating employer, provided he or she will not be subjected to an atmosphere of hostility, embarrassment or humiliation. Recently, the Ontario Court of Appeal revisited this issue.

In Farwell v. Citair Inc. (General Coach Canada), the plaintiff argued that he had been constructively dismissed when his role was changed from vice president of operations to purchasing manager. The trial judge agreed, finding that the change in title reflected a diminished role in the company resulting in a loss of status and prestige. The plaintiff had been employed for 38 years and the trial judge found that 24 months was the appropriate notice period at common law.

With respect to mitigation, the company had argued at trial that the plaintiff ought to have accepted the position as purchasing manager to mitigate his damages. His salary and benefits in the role would have remained unchanged. The only difference in remuneration was a lesser bonus. The plaintiff was well-liked at the company, and the circumstances surrounding his termination related to a reorganization. As such, the employer asserted that there was no animus against the plaintiff.

The trial judge held that the plaintiff was not obligated to mitigate by working in the purchasing manager position, as this would have led to humiliation and embarrassment for him. The trial judge found that in his mind, the plaintiff would have felt humiliated, as one of his subordinates was placed in his position and that reporting to this individual would have been humiliating, given their prior roles and responsibilities.

The Court of Appeal did not alter the trial judge’s findings with respect to the issue of constructive dismissal or the appropriate notice period at common law.

On the issue of mitigation, the court noted that the trial judge may have taken a subjective approach to the determination of whether the work atmosphere would have been embarrassing or humiliating for the plaintiff. This is contrary to the legal test, which is objective.

The court also noted that there may indeed be merit to the company’s argument that this was the type of circumstance in which a terminated employee is obligated to accept the lesser job.

However, the court did not decide these issues. It found that the duty to mitigate in the role of purchasing manager was never triggered. When the plaintiff refused to accept the position of purchasing manager and informed the company that he was treating the change as a constructive dismissal, the company never gave him the opportunity to work out the notice period. As such, the court found that the plaintiff had not breached his mitigation obligation.

Farwell v. Citair Inc. (General Coach Canada), 2014 ONCA 177 (CanLII)

Professional Pointer: Holding a position open for an employee for mitigation purposes can be beneficial in the right circumstance. Not only could this reduce the employee’s damages, but it could be used as a negotiating chip to attempt a settlement before trial.

Jessica Young is a lawyer at the firm of Stringer LLP, the Worklaw® Network member in Toronto, Ontario.

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